5 Equity Release Myths And The Reality Behind Them
Utilising the value locked up in your residential property for a comfortable and secure retired life can be a solution for many elderly individuals
. However, many are yet to understand or utilise this option, even though they do not have
alternative financial solutions to achieve their objective of living a contented life.
What is the reason behind this fear about equity release? The lack of understanding is one reason that prevents elderly individuals from availing the advantages of equity release loans. Here is a look at the five common equity release myths and the reality behind them.
Myth 1: Equity Release is not safe and regulated. Many people still consider that the schemes are under no supervisory body. In such a circumstance, these are not safe financial solutions.
The truth: The lifetime mortgage schemes came under the supervision of the Financial Services Authority in 2004. The home reversion plans came under the control of this authority in 2007. The Safe Home Income Plans (SHIP), which is a regulatory body, offers memberships only to financial services that adhere to a strict code of conduct.
Myth 2: You will lose your home. Many elderly individuals do not want to move into a different home after retirement. However, they do not want to release equity as well because they think that it will result in the loss of their home.
The truth: All SHIP authorised financial service providers guarantee that the homeowners have the right to live in the property against which the loan has been taken throughout their lives. The only condition is that it remains your primary residence. If you and your partner have taken the policy, the last living partner will have the same rights.
Myth 3: You will not have the right to shift to another property. Many individuals have the idea that once they take out an equity release, they will not have the right to move to another property.
The truth: This, again, is a misconception. If you think that you may need to relocate to another property in the future, perhaps to live somewhere close to your children, you need to select plans that offer this option. Many schemes offer the policyholders the option to shift to another property; however, it must meet the criteria set by the financial services.
Myth 4: You will not be able to leave an inheritance. Equity release reduces the value of your estate. However, if you have a large estate, you may benefit from it, as it may help reduce Inheritance Tax liabilities. You need to seek equity release advice for this.
The truth: Home reversion schemes offer the homeowner the option to sell a percentage of their home. You can leave the rest of your property to your children. Lifetime mortgage plans may also be taken out in such a manner that even after paying the loan, a considerable sum is left as inheritance.
Myth 5: Your children will have to repay the loan. If you think that the fluctuations in the real estate market may result in negative equity. In such a circumstance, your children may have to bear the burden of the loan.
The truth: If you opt for a scheme from a SHIP approved financial provider, you need not bother about this. The schemes available from these providers come with a no negative equity guarantee. With this, whatever the condition of the real estate market, you will never owe more than the value of your home.
by: Sophia
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